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STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Non-cash compensation related to equity awards is included in the following line items in the accompanying consolidated statements of operations and comprehensive income (in thousands):



	Three Months Ended March 31,
	2020		2019
Cost of revenue	$	242	$	153
Selling and marketing expense	1,156		1,749
General and administrative expense	9,123		10,221
Product development	1,396		1,930
Total non-cash compensation	$	11,917	$	14,053

Stock Options

A summary of changes in outstanding stock options is as follows:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
			(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2020	777,871		$	69.87
Granted ^(b)	69,319		275.82
Exercised	(2,462	)	67.05
Forfeited	(193	)	332.65
Expired	(1,974	)	352.10
Options outstanding at March 31, 2020	842,561		86.11		4.54	$	99,017
Options exercisable at March 31, 2020	677,829		$	43.56	3.49	$	98,896

(a)

The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company's closing stock price of $183.39 on the last trading day of the quarter ended March 31, 2020 and the exercise price, multiplied by the number of shares covered by in-the-money options) that would have been received by the option holder had the option holder exercised these options on March 31, 2020. The intrinsic value changes based on the market value of the Company's common stock.


(b)	During the three months ended March 31, 2020, the Company granted stock options to certain employees with a weighted average grant date fair value per share of $138.29, calculated using the Black-Scholes option pricing model, which vesting periods include (a) three years from grant date and (b) four years from grant date.

For purposes of determining stock-based compensation expense, the weighted average grant date fair value per share of the stock options was estimated using the Black-Scholes option pricing model, which requires the use of various key assumptions. The weighted average assumptions used are as follows:



Expected term ⁽¹⁾	6.00 - 6.25 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	52 - 53%
Risk-free interest rate ⁽⁴⁾	0.96%


(1)	The expected term of stock options granted was calculated using the "Simplified Method," which utilizes the midpoint between the weighted average time of vesting and the end of the contractual term. This method was utilized for the stock options due to a lack of historical exercise behavior by the Company's employees.


(2)	For all stock options granted in 2020, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.


(3)	The expected volatility rate is based on the historical volatility of the Company's common stock.


(4)	The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

Stock Options with Market Conditions

A summary of changes in outstanding stock options with market conditions at target is as follows:



	Number of Options with Market Conditions	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
		(per option)		(in years)	(in thousands)
Options outstanding at January 1, 2020	463,440	$	204.31
Granted^(b)	19,126	275.82
Exercised	—	—
Forfeited	—	—
Expired	—	—
Options outstanding at March 31, 2020	482,566	207.14		7.52	$	—
Options exercisable at March 31, 2020	—	$	—	0.00	$	—

(a)


(b)	During the three months ended March 31, 2020, the Company granted stock options with a grant date fair value per share of $196.07, calculated using the Monte Carlo simulation model, which has a vesting date of March 31, 2024.

For purposes of determining stock-based compensation expense, the grant date fair value per share of the stock options was estimated using the Monte Carlo simulation model, which requires the use of various key assumptions. The assumptions used are as follows:



Expected term ⁽¹⁾	7.00 years
Expected dividend ⁽²⁾	—
Expected volatility ⁽³⁾	51%
Risk-free interest rate ⁽⁴⁾	1.03%


(1)	The expected term of stock options with a market condition granted was calculated using the midpoint between the time of vesting and the end of the contractual term.


(2)	For all stock options with a market condition granted in 2020, no dividends are expected to be paid over the contractual term of the stock options, resulting in a zero expected dividend rate.


(3)	The expected volatility rate is based on the historical volatility of the Company's common stock.


(4)	The risk-free interest rate is specific to the date of grant. The risk-free interest rate is based on U.S. Treasury yields for notes with comparable expected terms as the awards, in effect at the grant date.

A maximum of 805,885 shares may be earned for achieving superior performance up to 167% of the target number of shares. As of March 31, 2020, performance-based nonqualified stock options with a market condition of 481,669 had been earned, which have a vest date of September 30, 2022.

Restricted Stock Units

A summary of changes in outstanding nonvested restricted stock units ("RSUs") is as follows:



	RSUs
	Number of Units		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	144,939		$	267.85
Granted	97,375		276.84
Vested	(40,676	)	243.25
Forfeited	(4,181	)	265.80
Nonvested at March 31, 2020	197,457		$	277.42

Restricted Stock Units with Performance Conditions

A summary of changes in outstanding nonvested RSUs with performance conditions is as follows:



	RSUs with Performance Conditions
	Number of Units	Weighted Average Grant Date Fair Value
		(per unit)
Nonvested at January 1, 2020	14,647	$	210.55
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at March 31, 2020	14,647	$	210.55

Restricted Stock Awards with Performance Conditions

A summary of changes in outstanding nonvested restricted stock awards ("RSAs") with performance conditions is as follows:



	RSAs with Performance Conditions
	Number of Awards		Weighted Average Grant Date Fair Value
			(per unit)
Nonvested at January 1, 2020	47,608		$	340.25
Granted	—		—
Vested	(5,951	)	340.25
Forfeited	—		—
Nonvested at March 31, 2020	41,657		$	340.25

Restricted Stock Awards with Market Conditions

A summary of changes in outstanding nonvested RSAs with market conditions at target is as follows:



	RSAs with Market Conditions
	Number of Awards	Weighted Average Grant Date Fair Value
		(per unit)
Nonvested at January 1, 2020	26,674	$	340.25
Granted	—	—
Vested	—	—
Forfeited	—	—
Nonvested at March 31, 2020	26,674	$	340.25

A maximum of 44,545 shares may be earned for achieving superior performance up to 167% of the target number of shares. As of March 31, 2020, performance-based restricted stock awards with a market condition of 29,601 had been earned, which have a vest date of September 30, 2022.